Lufthansa shares nosedive amid Gulf challenge

[LONDON] Deutsche Lufthansa AG fell the most in five years after cutting earnings forecasts for this year and next as a capacity splurge at Gulf rivals hurts prices and its own pilots protest against cost cuts.

Operating profit will amount to about one billion euros (S$1.69 billion) in 2014 and two billion euros in 2015, Lufthansa said in a statement, versus prior forecasts of 1.3 billion euros to 1.5 billion euros and 2.65 billion euros respectively.

Chief executive officer Carsten Spohr, who took over on May 1, is grappling with the challenge posed by carriers such as Dubai-based Emirates, whose hubs are stripping traffic away from traditional European bases. Gulf airlines have become a "major concern" as fares come under pressure, while a pilot strike and currency changes are also weighing on earnings, Lufthansa said.